Alaska has no known cases of the coronavirus, but the outbreak that began in China has set off economic shockwaves that are already jolting Alaskans. For one, the virus crushed the stock market in the last week of February. Looking ahead, economists foresee several grim possibilities, but they’re not universally terrible.
One of the biggest unknowns is what the epidemic will mean for Alaska’s summer tourism. The vast majority of Alaska’s visitors come from other U.S. states, not China. But with a viral infection in the news, will they still want to crowd onto airplanes and cruise ships to get here?
Meilani Schijvens of Juneau said the coronavirus could actually boost Alaska tourism.
“Obviously, sometimes when there are world events, people have more comfort traveling domestically rather than abroad,” said Schijvens, who runs an economic analysis and research firm, Rain Coast Data. Her specialty is Southeast Alaska, so she keeps an eye on the cruise industry.
Images of the Diamond Princess stuck in Yokohama with thousands of passengers in quarantine wasn’t great advertising for booking a cruise, at least not in Asia.
Schijvens said cruise lines might reposition ships from Asia to Alaska.
“It actually might be the case where we could see increased ships, especially earlier in the season when there’s more openings in our ports,” she said.
That does appear to be happening: Cruise Lines International Association Alaska said at least two ships are leaving Asia earlier than scheduled, adding six voyages to their Alaska season. But don’t bank on it. In an email, a representative from the trade association warned things can change quickly.
Tourism jobs were expected to become the largest source of wages for Southeast this year for the first time ever, Schijvens said, because so many state government jobs have been cut from the budget. She said the seasonal nature of tourism magnifies variability.
“Because so much of our economic commerce happens in the summer, even micro-impacts to our industries could have significant effects on our economy,” she said.
Schijvens knows of one smaller ship that has cancelled a few sailings in Southeast.
Beyond tourism, Schijvens sees a slew of potential losses. Consider global shipping.
“If there’s some type of disruption in shipping, that could impact our mining sector. That could impact our seafood – getting our seafood to market. But it could also affect our access to food and freight,” she said.
It’s not that supermarket shelves would be empty. But Schijvens said a hitch in international cargo traffic might mean some regularly stocked items aren’t available.
Among the effects Alaska is already feeling, the biggest is probably what the virus has done to the world demand for oil.
“Oil prices have probably fallen by more than $5 a barrel,” said Neal Fried, an economist at the Alaska Department of Labor.
Lower oil prices mean the state has less revenue to spend. And low prices discourage the oil industry. Fried said the virus-induced price drop isn’t likely to derail projects already planned for this year.
“But, you know, it could take a little bit of the edge off the willingness of some investment to go forward,” Fried said. “Oil prices obviously are important when it comes to the oil industry and what decisions they make.”
Alaskans with money in the stock market are feeling the economic pain of the virus. When the markets drop, Fried said, Alaska’s Permanent Fund feels the pinch, too.
“And now that a fair amount of our (state) revenues are now flowing from the Permanent Fund earnings, you know, in the long run — I mean it’s too early to tell, but that also could have an impact,” he said.
It’s also too early to know if the market drop will result in lower dividends.
The worst-case scenario is, of course, widespread disease and some deaths. In addition to the human tragedy, it would also be expensive and ruinous to the economy. But, short of total catastrophe, one of the biggest economic costs would be if public facilities and workplaces have to close to prevent the virus from spreading.
“The CDC did recently suggest that people make preparations for their lives to be interrupted by an outbreak in the United States,” said Kevin Berry, an economist at the University of Alaska Anchorage who has studied the impact of epidemics. “So the potential costs of things like foregone childcare, closed schools and other interruptions to just business could be large.”
The Centers for Disease Control is recommending that Americans stock their pantries, refill important prescriptions and take steps to work from home, in case we have to hole up for a while.